<COLOR FONT=BLUE>MARKET SNAPSHOT--Techs hammered after Apple warning
Dow, Nasdaq lick their wounds
By Julie Rannazzisi, CBS.MarketWatch.com
Last Update: 4:48 PM ET Sep 29, 2000
NEW YORK (CBS.MW) - Tech stocks got bashed Friday as Apple Computer's profit warning unleashed the bears on Wall Street - a dreary end to an ugly quarter for the Nasdaq.
All tech sectors dripped in lots of red ink, led by the hardware and chip sectors. The Goldman Sachs Hardware Index ($GHA), which tracks a cluster of PC stocks, tumbled 7.6 percent.
Within the broader market, UAL's negative pre-announcement bruised airlines shares. Safe-haven areas of the marketplace fared well, however, as investors piled into utility and drug stocks. And brokerage stocks eked out gains as merger speculation fueled the fire of some stocks in the group. Oil and oil service shares also advanced with crude oil prices adding 50 cents to $30.84.
"This is a sick market. There's still a lack of upside catalysts to really produce an upswing," said Todd Gold, technical strategist at Gruntal & Co. "Many large stocks have rolled over with across-the-broad weakness."
Gold believes the best-case scenario for the market in the near-term is sideways action, which would allow the major averages to heal.
The third quarter has been a tough one for tech stocks, as demonstrated by the Nasdaq's sloppy performance. The index is down 7.4 percent for the quarter. But the improved performance of many old-economy stocks, such as the financials, allowed the Dow to chisel out a 1.9 percent gain in the third quarter.
"We've seen some real eye-popping swings between value and growth stocks this month," said Tom Stevens, managing director and principal at Wilshire Associates. There has been a dramatic reversal in the marketplace, he added, with value stocks roaring back as growth stocks struggle.
"Value stocks are getting the attention they deserve. It'll be hard for growth stocks in the next quarter because they still have so much fluff in them. And companies continue to ratchet their earnings estimates lower," Stevens added.
"This kind of market is wreaking havoc with long-term investors, forcing more people to trade and increasing turnover," Stevens said.
The Dow Jones Industrials Average ($DJ) plummeted 172 points, or 1.6 percent, to 10,650 -- at its lows of the session.
Pushing the Dow deep in the red were shares of Hewlett-Packard, Boeing, Intel and Microsoft while Alcoa, DuPont and Citigroup managed a respectable advance.
The Nasdaq Composite ($COMPQ) relinquished 105 points, or 2.8 percent, to 3,672 while the Nasdaq 100 Index ($NDX) shaved 154 points, or 4.2 percent, to 3,570.
"Bear markets have sharp rallies like Thursday that do not have follow-through. While playing for a short-term rebound into early next week, I still think that upper resistance will restrain any rebound attempts, and the market will ultimately reach lower targets. This is still a developing downtrend," said Tom Peterson, publisher of the newsletter Bulls Eye Research.
The Standard & Poor's 500 Index ($SPX) slipped 1.5 percent while the Russell 2000 Index ($RUT) of small-capitalization stocks fell 0.5 percent.
Separately, volume was heavy at 1.13 billion on the NYSE and at 1.99 billion on the Nasdaq Stock Market. Breadth was mixed, with winners outpacing losers by 15 to 14 on the NYSE while decliners beat advancers by 22 to 19 on the Nasdaq.
Separately, Trim Tabs estimates that all equity funds had outflows of $3.8 billion during the week ended Sept. 27 versus inflows of $13.5 billion in the previous quarter. Equity funds investing primarily in U.S. stocks had outflows of $2.4 billion vs. inflows of $12.1 billion in the prior week.
Sector movers
Hardware shares took it on the chin as Apple warned of an earnings shortfall.
Apple (AAPL) warned late Thursday that it expects to earn between 30 and 33 cents a share in the fourth quarter due to slumping sales. First Call had expected earnings of 45 cents a share. The company said it would give Wall Street its longer-term growth targets when it reveals results on Oct. 18. The stock plunged $27.75, or 52 percent, to $25.75 and was hit by a smattering of downgrades from Morgan Stanley Dean Witter, Bears Stearns, Banc of America, PaineWebber, Merrill Lynch, Salomon Smith Barney and SG Cowen.
Other stocks struggling in the PC group included Dell Computer (DELL), down 7.9 percent, or $2.63 to $30.81, Gateway (GTW), off 13.4 percent, or $7.25 to $46.75, and Hewlett-Packard (HWP), off 6.7 percent to $96.88. Bear Stearns also lowered its rating on a cluster of other PC makers, including Dell Computer, Gateway, Compaq and Hewlett-Packard.
The Apple news put pressure on the entire tech sector, which is still licking its wounds following Intel's warning last week. The Philadelphia Semiconductor Index ($SOX) fell 5.5 percent after rising 4.3 percent on Thursday. Among the downside movers in the chip arena, Micron Technology (MU) erased 7.1 percent to $46, Intel (INTC) shed $2.88 to $41.56 and KLAC-Tencor (KLAC) dropped 9.1 percent to $41.19.
Banc Boston Robertson Stephens had some cautious comments on Micro Technology. The firm said recent field checks have showed a gradual weakening in memory prices, prompting a cut in its revenue and earnings estimates for Micron for fiscal 2001. Read related Pulse item.
Another warning made its way through the market Friday as UAL Corp. said it expects to register a third-quarter loss with a fourth-quarter loss also probable. First Call had been expecting a 97-cent-a-share gain in the third quarter and earnings of 63 cents per share in the fourth quarter. The parent of Unites Airlines said the financial implications of the pilot contract struck this summer as well as higher fuel costs hurt revenues. The stock (UAL) fell 4.5 percent, or $2.00 to $42 and the Amex Airline Index ($XAL) fell 3.5 percent. Other carriers under the gun Friday included Delta Air Lines (DAL), off 3.9 percent to $44.38, and AMR Corp. (AMR), down 5.4 percent to $32.75.
Brokerage stocks gained ground as merger speculation swelled shares of Bear Stearns (BSC), which rallied 14.6 percent to $65.00. Bear has been in the rumor mill for some time now, with investors focused on ING Barings as the potential buyer this time around. The Amex Securities Broker/Dealer Index ($XBD) gained 1.4 percent.
Treasury action
In the Treasury arena, prices climbed, benefiting mildly from the dollar's strength and expected weakness in the equity market.
The 10-year bond gained 1/32 to yield ($TNX) 5.81 percent while the 30-year Treasury bond gained 5/32 to yield ($TYX) 5.88 percent.
Over on the economic docket, August personal income gained 0.4 percent versus expectations for a 0.3 percent increase while personal consumption expenditures climbed 0.6 percent compared to expectations for a 0.5 percent gain.
The Chicago Purchasing Managers index for September came in at 51.4 percent versus the previous month's 46.5 percent. View Economic Preview, economic calendar and forecasts and historical economic data.
In the currency market, the dollar strengthened against both the yen and the euro. Investors digested news that Denmark rejected the European currency union late Thursday, with 53 percent voting against adopting the euro and 47 percent in favor.
Euro/dollar added 0.5 percent to 0.8833, erasing earlier losses, as many would-be euro sellers stuck to the sidelines for fear of central bank intervention. The euro is up about 2.5 percent since last Thursday - the day before the Federal Reserve, European Central Bank and Bank of Japan jointly intervened to sustain the embattled currency.
Julie Rannazzisi is markets editor for CBS.MarketWatch.com. |
